A broad but brief survey of the literature on remittances and growth shows that indirect effects are only included via interaction terms. We regress data for migration, worker remittances, savings, investment, tax revenues, public expenditure on education, interest rates, literacy, labor force growth, development aid and GDP per capita growth on migration, remittances and other variables for a panel of countries with income below $1200. The estimated dynamic equations are integrated to a system used for baseline simulations.

Comparison with the counterfactual policy simulations of “only 50% remittances” or “no net migration anymore” shows that the total effect of remittances on levels and growth rates of GDP per capita, investment and literacy are positive, while that of net migration is negative for literacy and investment but positive for growth.